How TikTok is slowly killing Alibaba

On the surface, they don’t look much like competitors: TikTok, the social media platform made famous by dancing teenagers, and Alibaba, the ever-conquering e-commerce giant.

But as Henry Chia explains, the Chinese tech powerhouses are locked in a somewhat hidden battle for supremacy… and you might be surprised that TikTok is in the box seat.

It’s been a difficult period for Alibaba.

Not only has it copped a crushing fine for anti-monopoly beaches and endured a crippling economic slowdown, its fearless founder Jack Ma was forced to give up control of affiliated company the Ant Group.

They, in themselves, aren’t insurmountable problems.

With a market cap of almost US$300 billion, Alibaba is well and truly big enough to weather even the most violent of storms.

But along with its well-documented recent challenges, the company is also facing a potentially deadly showdown with a strong, young, barnstorming rival.

Untitled design 59 TikTok
Jack Ma, Alibaba Founder

That rival, is TikTok

Now, you might be wondering how TikTok could possibly take down an e-commerce player as established as Alibaba.

Well, as S&P global ratings has noted, more and more people are shopping online using through increasingly popular short-form video platforms.

Those platforms, which include TikTok (known as Douyin in China) and Kuaishou Technology, are now taking share in high-spending categories, including cosmetics and fashion.

Influencers from the uber-famous Kim Kardashian to the lesser-known South Korean actress Lee Si-Young are building huge audiences who love to buy what they promote.

TikTok dancers
TikTok has become the king of user-generated content

TikTok’s rapid rise

TikTok was launched in 2016 and as of June 2022 had a whopping 400 million monthly active users.

The user base and user time spent on the platform have surged and it’s estimated that Chinese internet users now spend nearly 35% of their online time on short-form video platforms.

“These platforms can monetize user attention through advertisements and by selling products directly through their live streaming platforms,” S&P said in a new report.

“As a result, among the top six e-commerce platforms, Douyin’s and Kuaishou’s combined GMV share has surged from less than 2% in 2018 to 10% in 2021.”

This rise represents an incredible 800% increase in GMV size in less than three years.

TikTok chart
A chart showing the increase of time spent on short-form video platforms. (Source: S&P Global)

The power of attention

Anyone in marketing will tell you it’s all about “getting the eyeballs” – and TikTok is certainly doing that.

Those eyeballs are generally young, and that bodes well for the short-form video platforms in the future.

“The runway for growth remains long,” says S&P.

“And as the largest e-commerce platform in China, Alibaba could be the most affected by their expansion.”

TikTok chart
(Source: S&P Global)

“Short-form video key opinion leaders and their user-generated content are highly engaging and can often be more effective in selling or advertising consumer products, particularly for the more profitable long-tail or fashion-related consumer products.”

S&P does, however, point out that the likes of TikTok face a ceiling for their e-commerce business.

“Users flock to short-form video apps mostly for entertainment,” the ratings agency said.

“Short-form video platforms that push too much e-commerce content risk alienating users.”

The battle lines are drawn.

It remains to be seen which army will prevail, but at this stage, TikTok appears to have the numbers.

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